Good day, and welcome to the OneWater Marine Fiscal Fourth Quarter and Full Year 2024 Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jack Ezzell, Chief Financial Officer. Please go ahead.

Good morning, and welcome to OneWater Marine’s fiscal Q4 and full year 2024 earnings conference call. I am joined on the call today by Austin Singleton, Chief Executive Officer; and Anthony Aisquith, President and Chief Operating Officer. Before we begin, I'd like to remind you that certain statements made by management in this morning's conference call regarding OneWater Marine and its operations may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. Factors that might affect future results are discussed in the company's earnings release, which can be found in the Investor Relations section of the company's website and in its filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. Please note that all comparisons of our fourth quarter 2024 results are made against the fourth quarter of 2023 unless otherwise noted. With that, I'd like to turn the call over to Austin Singleton, who will begin with a few opening remarks. Austin?

Thanks, Jack, and thank you, everyone for joining today's call. This past year has been challenging for our team, our industry, and our communities. Tragically, in late September, Hurricane Helene struck followed by Hurricane Milton in early October, causing extensive damage and disruption across the West Coast of Florida. Our thoughts and prayers remain with those affected by the storms. Most importantly, I’m pleased to report that our teams are safe and most of our stores sustained only minor damage. As of today, while a few docks are still under repair, all retail locations have reopened and are fully operational. Despite the hardships, the resilience and support within these communities has been remarkable. I'm incredibly proud of our team's dedication to our customers and the communities during these difficult times. As you would expect, the disruption from Hurricane Helene significantly impacted our fourth quarter results. As previously disclosed in our press release in late September, we temporarily closed several stores in preparation for the storm and as insurance companies imposed a moratorium on writing new policies. As a result, sales were disrupted during a typically strong selling period for us. While the number of sales were closed in October, it is difficult to predict when the remaining sales will deliver. Customers are starting to settle insurance claims and rebuild their lives and our teams are prepared to serve them when they are ready. This past year was challenging for the marine industry as demand and pricing reset to historical norms. Our team's strong operational execution along with our revenue, brand and geographic diversity helped us mitigate these challenges. We remain focused on disciplined expense management and keeping our operating model in line with current demand. As a result, we executed further cost saving measures in the fourth quarter, including rationalizing additional brands and consolidating certain parts and service facilities to more efficiently serve our customers. Although, these restructuring actions impact margins in the fourth quarter, we expect to see benefit in 2025. We implemented similar actions earlier in the year that are already yielding results, as reflected in our lower SG&A expenses compared to the prior year period. We believe this positions us for success in the coming year. Turning to full year results. Same-store sales were down 7%, reflecting softer demand within the broader recreational marine market. While this fell slightly short of our target, it's worth noting that through August, same-store sales were down only 5%, aligning with our expectations before the impact of Hurricane Helene. Our Distribution segment service parts and other sales were also negatively impacted throughout the year by lower production for manufacturers. With higher interest rates on our floor plan and the current selling environment, we remain focused on managing our inventory to align with retail demand. I am proud of the progress we've made in executing our inventory strategy, and we are well-positioned as we head into 2025 with inventory tracking in the right direction. Turning to M&A. We were relatively quiet in 2024 as compared to prior years, but the pipeline remains active. Opportunistic transactions with minimal capital outlay continue to be attractive and plentiful. We are actively monitoring the market and pursuing targets that meet our disciplined financial criteria while also supporting our strategic objectives. As we look back on the year, our diverse revenue streams, strategic brand offering and geographic reach have helped us offset some of the challenges from macroeconomic uncertainty and adverse weather. This has enabled us to navigate what remains a complex operating environment. While cautious, we hold an optimistic view as we move into 2025. As Anthony will touch on shortly, the customer is active and we are strategically managing our inventory and our cost optimization efforts from March and September are working. Recent interest rate cuts and inventory reduction have helped reduce our overall interest expense and carrying costs. While not embedded into our guidance, future interest rate cuts should provide additional tailwinds to our business. With that, I will turn it over to Anthony to discuss the business operations.

Thanks, Austin. The sales pace for the quarter started in line with the month of June with demand increasing slightly in August. However, September was challenged due to Hurricane Helene and October was further impacted by Hurricane Milton. These disruptions on the West Coast of Florida impacted sales for September and will continue to have an effect for the first half of the year as customers rebuild. We are pleased to report a record Fort Lauderdale boat show with unit sales up double digits compared to the prior year. The strong activity highlights the sustained customer appetite for boating despite uncertainty in the election and overall economy at the time. Our manufacturer partners unveiled a variety of new 2025 models, adding to the excitement and driving demand. Our diverse brand portfolio has been a significant competitive advantage, ensuring we have the right boat for every customer, regardless of their location. Promotional activity remains robust, with the manufacturers consistently offering support to drive sales and clear out aged inventory. Elevated inventory levels have been a common theme across the industry this year. Although, we typically increase inventory in the fourth quarter as part of a seasonal build, our inventory was slightly down sequentially due to our optimization efforts. As we redefine our product strategy and phase out certain brands, we expect inventory to decrease another 10% next year. Regarding our current inventory composition, we are comfortable with the mix of 2024s and 2025 models. We have reduced our orders for model year 2025 and are being replaced at a slower pace than the prior year. Our finance and insurance penetration remained strong and well within our target range. Customers have appreciated a slightly lower interest rate environment, so any future rate cut should make financing options even more attractive to them while also improving the economics of the boats financed through OneWater. And with that, I'll turn the call over to Jack to go over the financials in more detail.

Thanks, Anthony. As mentioned, our fourth quarter results were impacted by Hurricane Helene. The closure of stores and insurance markets prior to the storm directly affected our revenues. Fiscal fourth quarter revenue decreased 16% to $378 million in 2024 from $451 million in 2023. New boat sales were down 18% to $217 million in the fiscal fourth quarter of ‘24, while pre-owned boat sales decreased 20% to $73 million. Revenue from service parts and other sales for the quarter decreased 7% to $76 million. Driving this was a reduction in sales on our Distribution segment, which was partially offset by increases within our dealership segment. Finance and insurance revenue decreased 12% to $11 million in the fourth quarter but was slightly higher as a percentage of total boat sales. Gross profit decreased 24% to $91 million in 2024 compared to $119 million in 2023. This was driven by the return to pre-COVID margins on boat sales, lower margins on brands we are exiting, and restructuring charges included in cost of sales. Sequentially, gross profit margin declined, but absent the restructuring charges and cost of sales, gross profit was in line with the June quarter and with our expectations. Fourth quarter 2024 selling, general and administrative expenses decreased to $80 million from $85 million. SG&A as a percentage of sales was 21%, up 220 basis points on lower sales. On a dollar basis, SG&A was down 6% due to the previous cost reduction actions and ongoing expense management and lower personnel costs in the quarter. Operating income increased by $4 million from a loss of $117 million and adjusted EBITDA was $8 million compared to $30 million. Net loss for the fiscal fourth quarter totaled $10 million or $0.63 per diluted share compared to a net loss of $111 million or $6.89 per diluted share. In the fiscal fourth quarter, adjusted loss per diluted share was $0.36 compared to an adjusted earnings per diluted share of $0.42. Again, these amounts were significantly affected by the impact of Hurricane Helene. Turning to the Q4 results. Total revenue for 2024 decreased 8% to $1.8 million compared to the prior year, driven by a decrease in units sold for both new and pre-owned. Same-store sales decreased 7% in fiscal 2024, which was impacted by a softer retail environment and weather-related closures. Additionally, service parts and other revenue decreased 10% to $291 million for fiscal 2024, driven by lower sales from our distribution segment, partially offset by increases in sales from our dealership segment, which was up year-over-year as we expand this important part of our business and service our customers. Full year 2024 gross profit decreased 19% to $435 million, as a result of changing market dynamics, and gross profit margin for fiscal 2024 was 24.5%. Selling, general and administrative expenses in fiscal 2024 decreased to $333 million or 18.8% of revenue from $346 million or 17.8% of revenue in fiscal 2023. The increase in selling, general and administrative expenses as a percentage of revenue was driven by lower revenues. However, our variable cost structure and targeted cost actions support lower SG&A on a dollar basis. The cost reduction actions we made in March and September will continue to moderate our overall SG&A. We will continue to practice proactive expense management and have the flexibility to accelerate cost actions as necessary should the need arise. Full year 2024 operating income grew to $65 million compared to the prior year operating income of $18 million, primarily due to a non-cash impairment charge related to certain intangible assets during the fourth quarter of 2023. Net loss for fiscal year 2024 was $6 million or $0.39 per diluted share compared to a net loss of $39 million or $2.69 per diluted share in the prior year. The business generated adjusted EBITDA of $82 million for the fiscal year 2024 and adjusted earnings per share of $0.98 per diluted share compared to $5.10 per diluted share in 2023. Turning now to the balance sheet. On September 30, 2024, total liquidity was $30 million including $17 million of cash and additional availability under our credit facilities. Total inventory on September 30, 2024 was $591 million compared to $599 million on June 30, 2024. We are comfortable with our current mix in aging and as we execute on our brand rationalizations, we expect an incremental benefit from further inventory reduction. Total long-term debt as of September 30, 2024 was $423 million resulting in a net leverage of 4.9 times trailing 12-month adjusted EBITDA. The hurricane impacts on the business have pushed our net leverage higher than our expectation, but as the West Coast of Florida recovers, we will reduce our leverage in the back half of 2025. Looking ahead to 2025, we are cautiously optimistic as we expect demand to fluctuate with traditional seasonal cycles. We anticipate total sales to be in the range of $1.7 billion and $1.85 billion with same-store sales up in the low single digits, noting a softer start to the year as we work through the impacts of Hurricane Helene and Milton in the first quarter. We expect adjusted EBITDA to be in the range of $80 million to $110 million and adjusted earnings per share to be in the range of $1 to $2. To conclude, we continue to focus on optimizing our costs, inventory, and debt levels as we adapt to the changing market dynamics. While 2024 was a challenging year, we have taken actions to position OneWater for success and look forward to 2025. This concludes our prepared remarks. Operator, will you please open the line for questions?

We will now begin the question-and-answer session. Our first question comes from Joe Altobello with Raymond James. Please go ahead.

Thanks. Hey, guys. Good morning. First question for you, Jack. I guess, if you could quantify for us, what the impact on revenue and EBITDA in the quarter was from Helene?

Yeah. Thanks, Joe. It's a tough one to actually get a very specific number on. The period of time, it really was out a little over a week's time from quarter end. But we're estimating it's probably in that $30 million plus range. Some of it, we were able to get some deals like on the East Coast of Florida, which wasn't impacted. We had some insurance markets open up right on the 30th. So real fluid, but it's somewhere in that, I'll call it, all that range.

Okay, helpful. And then, in terms of the expectation for Helene and Milton, maybe help us understand how you're thinking about the first quarter in terms of EBITDA? And does your guidance assume that you recoup any of those lost sales over the balance of the year?

It's hard to predict exactly how things will unfold. We anticipate that the fourth quarter of '25 will be a straightforward comparison for us, and we expect to see a significant increase. However, we also believe there will be some recovery in the second half, particularly on the West Coast of Florida. Keep in mind, though, that after a hurricane, customers don't bounce back immediately. Many are focused on replacing their homes, cars, and businesses, and unfortunately, buying a boat often falls further down their list of priorities. It can take as long as 18 months for some to feel ready to make that purchase. Therefore, we don't expect to see a sharp increase in sales following a hurricane, but we believe that after about six months, some customers will be ready to enter the market again. We're keeping a close eye on the West Coast, and while we've seen mixed results, some of our stores are performing better than others. We have around ten stores in the affected area, spanning from Tampa and Clearwater down to Fort Myers.

Okay. Thank you.

Thanks, Joe.

And the next question comes from Craig Kennison with Baird. Please go ahead.

Hey, good morning. Thanks for taking my question. Austin, I'd love to ask you just to give your point of view on the state of the boat consumer. We've got a difficult environment to predict, whether it's you mentioned the Fort Lauderdale Show, which is positive. You've got a lot of other trends that are somewhat negative in the industry? And then you've got the election result, which I assume is friendly towards the boat consumer. But how do you unpack all of that and digest that information to provide a boat outlook?

That's a challenging question. Looking at the Fort Lauderdale Show, it was an impressive event and felt refreshing. I'll let Anthony share his insights, as he spent considerable time at the docks. The atmosphere felt different, perhaps partly due to the relief after the election. Although the weather was not great initially, it turned out better than we anticipated. Overall, October was a solid month, although some of the success was a continuation from September. It just felt distinct, and Anthony, do you have anything to add? It's difficult to articulate, but the energy and mood were noticeably different from what we experienced over the past nine months.

Yeah. We didn't have a lot of the interest rate conversations with customers. We didn't have a lot of negative conversations where they were waiting for something. Everybody was pretty positive and the boats were priced accordingly and aggressively. They also moved some older inventory, so it created a lot of stir and it felt very good back to where the boat business usually feels to me personally.

And just to follow-up on that, it sounds like you didn't get a lot of pushback on interest rates. Were you seeing a customer that's more affluent and just not sensitive to rates? And if so, do you have any comment on how the rate sensitive consumer might be thinking?

I believe we've observed this trend over the past five to seven years. The affluence of our customers continues to grow, and from a financing perspective, we put in a lot of effort to remain within our desired penetration range. Now, we just need to focus on improving our margins. It's clear that customers are significantly more affluent than they were a decade ago. Access to water has improved for many, which is encouraging because it increases churn. Greater scarcity of access to water, combined with increased affluence, is beneficial for churn as we advance the industry.

That's great. Thank you.

And the next question comes from Drew Crum with Stifel. Please go ahead.

Okay. Thanks. Hey, guys. Good morning. So on your same-store sales for the quarter, it appeared to lag the industry. Is it simply the geographic concentration in Florida or are there any other factors you think contributed to the share loss? And then I have a follow-up.

Yes, I believe it has to do with our significant number of stores along the Gulf Coast. When you take that into account, our performance was slightly poorer than the industry, which was around 13% to 14%. We were definitely a couple of points below that. However, we have a much heavier focus on the Gulf Coast. When the storm was approaching, every store from the Florida Keys to Orange Beach, Alabama, was in preparation mode. Our service department was closed, we weren't doing retail work, and we were focused on getting customer boats and our own boats out of the water and securing everything. This likely contributed to our underperformance.

Got it. Okay. Thanks, Austin. And then with your pro forma leverage approaching 5 times, can you address what kind of flexibility you have around uses of cash? And I guess M&A specifically, I think you mentioned that you've got a full pipeline entering fiscal '25 and where do you expect to be at year end? Thanks, guys.

Yeah. No, I think it's we continue to look at acquisitions. Some of the last couple of deals we've done have been minimal capital outlay. And I think there's a number of them in the pipe that are such. There's also some larger deals where they're still going through a normalization process of their earnings. And they have to kind of anniversary that before they're going to be realistic with purchase prices. So we're conscious of where we're at. We're working towards reducing debt and driving things forward with the cost actions that we take with the brand alignment that we took and reducing the number of brands; all of that helps to simplify our business, increase the profitability of our business and strengthen as we go forward.

Thanks, Jack.

Sure.

And the next question comes from Fred Wightman with Wolfe Research. Please go ahead.

Hey, guys. Good morning. I was hoping you could just help us out a little bit with some of the segment level expectations, particularly when it comes to gross margins. You mentioned that new boats are sort of back to where they were from a pre-COVID perspective, but there's also a lot of promo in the market. So as you think about fiscal '25, do you expect that sort of be up, down, sideways? How should we think about that?

I'm cautiously optimistic that we can achieve some margin improvement for new boats as we approach 2025. It will be interesting to see how the industry's reduction in outdated inventory progresses and how quickly promotional spending decreases, which will need to be compensated by margin. As we clear out older inventory and dealers are not pressured to sell due to financing costs, we should experience some margin relief. The exact amount, whether it's half a point, one point, or one and a half points, is still uncertain, but I don't anticipate significant changes until we reach the peak season in April and May. We can expect some continued clearing of old inventory and some improvement, but we need to stay the course. It feels like we're gradually getting closer to our goals. It’s taking time to clear out the inventory, but conditions are better now than they were before. Conversations with dealers indicate positive trends, including increased payoffs following the Lauderdale Boat Show and across the nation. Overall, things appear to be improving, and we need to maintain this momentum. We should see a bit of a margin increase as we move into the latter half of next year.

Yeah. I'll point out two things, Fred. We had some restructuring charges hit new boat cost of sales, right? So new boats seem to tick down a little bit. When you back out those restructuring charges, we get right back to that 17% and change percent on new boats. And then the same thing in parts, service and other, we ticked down just below 40%, because we consolidated some plants, some warehouses, and there's some charges restructuring charges in there that brought that number down below 40%. But on an ongoing basis, it will be above 40%. We expect that as well. I think as we look into the first quarter with some of these brands that we're exiting, we could see some little bit of margin pressure there. But we also have some exciting ‘25 product that we're getting full margin on. So it will be a balance.

Okay. That makes sense. And then on the cost saves, will you just remind us or help us with sort of what the all-in expected benefits for that is heading into 25? I know that I think you guys did an action back in March and then there were some September actions too. But as we just think about the SG&A tailwind into next year, what is sort of the all-in benefit from that?

Yeah. It's been interesting. We wanted to trim some costs. We've actually seen in many cases unit sales increasing in recent months. So we have to kind of keep this balance of, we want to make sure we're having adequate staffing to keep to support our customers. And so, we've made some cuts. The March cut was around $10 million, so about half of that now is baked in. And then, we took in about another $5 million at the end of the year that will bake into '25.

Great. thank you.

And the next question comes from Michael Swartz with Truist Securities. Please go ahead.

Hey, guys. Good morning. Maybe just to drill down a little bit more on your ‘25 guidance, the low-single digit comparable store sales growth expectation. Give us a little sense of the drivers there? What's your outlook for the industry during your fiscal year and are you embedding any benefit from share gains, pricing, etc.?

Yeah. I would say, we're definitely embedding some share gain. I think we will outpace the industry. If we're low-single digit positive, the industry is probably low-single digit negative. I think there's some uncertainty for us, in particular with respect to the West Coast of Florida, and how quickly that rebounds and exactly what that impact is on the same-store sales guide. Additionally, we have some exiting brands that we're pushing out. We have some store closures that will come out of the base that we did earlier this year. And so it's a little noisy, but we are positive on the year.

Okay. Jack? Hang on. Jack, real quick clarify that store closings. It's not like I mean, it's one-off satellite locations.

Yes, absolutely.

We're not closing any of our major stores or anything that has any substance to it. It's all really just do we really need to have a satellite that's 30 miles away from the mother ship of the spoken hub just because it was convenient and we got a cheap lease. Consolidating that back down is helping us with personnel costs and stuff like that. It just doesn't make sense. We won't lose that business. So it's not like we're closing stores. I don't want that to sound right.

Okay. Thanks for the clarification, Austin. And then just maybe to put a finer point on the first quarter, I mean, there's a lot of noise, a lot of obviously disruption and it sounds like you did get maybe some business back that shifted out of the fiscal fourth quarter. But would you expect EBITDA to be negative in the first quarter? I'm just trying to get a sense of how we should model it?

It wouldn't surprise me if it was slightly negative.

Okay. Wonderful. Thanks, guys.

Yes. I just think with the unknown of the West Coast, it's kind of hard to see with and then you combine some aggressive actions on some of these brands we're exiting and clearing out model year 2024s and calendar 2024. I think as well as right when typically the December quarter tends to be a slightly lower gross margin quarter when you look at it just from a seasonality perspective as well.

Okay, great.

And the next question comes from Noah Zatzkin with KeyBanc Capital Markets. Please go ahead.

Hi, thanks for taking my question. Just wondering if you could give any thoughts around kind of the state of the pre-owned market, any trends you're seeing there and how you're kind of thinking about ‘25? Thanks.

I would say the only aspect of the industry that remains constant is the pre-owned market, which still faces a supply shortage. We could definitely use three times the current inventory. This area is a significant focus for us and an essential component of our business, but it presents challenges due to the limited availability of stock.

Thank you.

That is the end of our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.